United Utilities shares were down 5% to 1,056p in early morning trading on Thursday, after the company announced an underlying pre-tax profit fall to £302 million in its FY 2022 compared to £460 million in FY2021.
The pre-tax profit drop reflected an £8 million rise in underlying profit and an £8 million drop in joint-venture losses, which was offset by a £174 million growth in underlying net finance expense on the back of higher inflation on its index-linked debt.
United Utilities reported a revenue uptick to £1.86 billion from £1.80 billion the year before, alongside a reported and underlying operating profit increase to £610 million against £602 million year-on-year.
The company highlighted a reported and underlying profit rise to £610 million from £602 million in 2021.
The group commented that inflation had increased its operating costs and net finance expense throughout the year, however, the company also said it led to an increased level of financing outperformance, leading to a higher level of regulatory capital value growth across 2020-2025.
Stakeholder Investment
United Utilities said it would build on its £600 million investment in its customer and stakeholders across 2010-2020 with a further investment of £400 million between 2020-2025, representing £765 million in excess of its final determination allowance in a move to advance environmental and customer incomes.
The firm noted its £280 million affordability scheme to support over 200,000 households over asset management period seven (AMP7), along with its £250 million investment into the environment, which included accelerating elements required under the Environment Act and funding its “Better Rivers: North West” plan in collaboration with The Rivers Trust.
“We take our role in the North West very seriously, and firmly believe that responsibly sharing our successes is the right thing to do for all our stakeholders,” said United Utilities CEO Steve Mogford.
“Our improving performance together with an environment of higher inflation is yielding a greater level of outperformance, and so we will be investing an additional £400 million to improve the service we provide to customers and to accelerate the delivery of environmental outcomes.”
Outlook for 2022-2023
The energy distributor mentioned an underlying EPS decline to 53.8p compared to 56.2p the last year and a reported loss per share of 8.3p against 66.5p the year before, however the firm announced a total dividend per ordinary share of 43.5p from 43.2p.
United Utilities announced an expected 1% increase in revenue for the coming year, and underlying operating costs approximately £100 million higher year-on-year, half of which is set to reflect labour, chemicals and additional costs, with the other half reflecting the cost impact of its £765 million stakeholder investment across last year.
The group confirmed it intends to raise its dividend in line with CPIH inflation to 2025, marking a growth of 4.6% based on November 2021 CPIH inflation rates.